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Ed Driscoll

Shades Of The Forgotten Man

April 7th, 2009 - 11:35 am

As Amity Shlaes wrote in her rather timely retrospective of the 1930s, during that hellish decade, local communities occasionally took to printing their own currency to get by, as she discussed last year with Reason magazine:

reason: What was happening at the Federal Reserve?

Shlaes: The Fed was young. It had only been founded in the 1910s. They didn’t really know what they were doing. Neither Roosevelt nor Hoover understood that the country was in a deflation, that they were having a money drought. Bank problems were a large factor too. I don’t think they really understood what was going on with money or that you could create more money. They were in the gold standard culture. But there was a professor whom I came to know and like in the period, Irving Fisher. He would go around and say, basically, “There must be more money!”

Some towns realized this. They made their own money. They manufactured it. In the book, you can see pictures of the scrip that they created. It often had a moral component. In Salt Lake City, they had a currency called the “valor.”

I believe Amity also mentioned “the Valor” during our interview for PJM Political; and like the idea of a deep, deep structural recession, it’s an idea whose time has come once again–much to everyone’s chagrin:

A small but growing number of cash-strapped communities are printing their own money.

Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.

“We wanted to make new options available,” says Jackie Smith of South Bend, Ind., who is working to launch a local currency. “It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace.”

About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.

Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.

And from the Valor to the Cheers, to the even more Orwellian named Plenty:

Pittsboro, N.C., is reviving the Plenty, a defunct local currency created in 2002. It is being printed in denominations of $1, $5, $20 and $50. A local bank will exchange $9 for $10 worth of Plenty.

“We’re a wiped-out small town in America,” says Lyle Estill, president of Piedmont Biofuels, which accepts the Plenty. “This will strengthen the local economy. … The nice thing about the Plenty is that it can’t leave here.”

Finally, while new paper money is being manufactured when and where necessary to make ends meet, old paper magazines are having a much tougher go of it, Megan McArdle writes:

Conde laid off Julian Sanchez yesterday amid more cuts in its digital properties.  Conde is in an especially bad place with the web:  their core competency is selling beautiful, glossy ad pages that readers enjoy looking at.  This does not translate well to a digital format, and it’s hard to make your company over overnight.

A bunch of my journalist friends and I have decided that our new toast is “to 2010″.  2009 has so far been pretty disappointing for almost everyone I know, not to mention the country for which we all have great affection.

Depending upon who’s in charge, of course. Which is why a surprising number of journalists may be finding today’s Depression-era flashbacks a welcome and refreshing change from the horrors of Reaganomics.